Nestlé enters the prepared meal delivery business

Nestlé's U.S. food and beverage division has acquired a minority stake in Freshly, a meal delivery startup that currently operates in 28 states.

Nestlé is the lead investor in a US$77-million-round of funding that will pay for construction of a new East Coast kitchen and distribution centre in 2018, as Freshly prepares to expand its service nationwide. The company didn't disclose exactly how much it invested. Headquartered in New York with operations in Phoenix, Freshly was founded in 2015 and employs 400. It plans to hire additional employees over the next 12 months.

Through the deal, Nestlé and fellow investors Highland Capital Partners, Insight Venture Partners and White Star Capital, gain access to the US$10 billion online prepared meals market in the U.S. Completion of the new facilities, Freshly estimates it can serve approximately 93% of consumers in the U.S. It can currently ship to approximately 40% of customers.

"While most food choices are still made in supermarkets, it's clear that consumers are responding to a growing universe of direct-to-consumer options, made possible through innovation," said Nestlé USA chairman and chief executive officer Paul Grimwood in a press release. "Acquiring a position in Freshly not only gives us access to this growth market, but it also brings reciprocal benefits for both companies."

As part of the agreement, Nestlé USA's Food Division president Jeff Hamilton is joining Freshly’s board of directors. Nestlé will lend its expertise in sourcing, food preparation and food safety, packaging and distribution, and advertising and marketing, according to the press release.